Business

Cable companies are going to screw up the internet because that's their job

You can't really get that mad at the companies that provide internet service to Americans.

They're destined to screw up the internet. They were created decades ago to screw up the internet.

Without the proper rules, few people outside of the company's own lobbyists and think tanks believe there's any chance that they don't screw up the internet. After all, these companies are obligated to do so by their shareholders. The internet doesn't exist apart from capitalism.

That's why the ongoing net neutrality debate is so important. The internet is a a lot of things to a lot of people, but the one universal thing is that it's fair. Your bits are as good as my bits are as good as Google's bits.

To keep it that way, we need rules. The U.S. government is well on its way to eliminating those rules and putting the responsibility of keeping the internet open entirely on the companies best-positioned to destroy it.

Don't get mad at the companies. Get ready. They're just doing what they're meant to do.

We've been here before. Monopolies have a long history in the U.S., particularly for basic utilities such as power. Because these companies exist without any serious competition and provide an essential service, they're tightly regulated by the government.

Major internet providers didn't evolve all that differently from the early power companies. Most internet providers, especially the big ones, started out small—and focused on cable TV. They started as tiny local companies that were granted exclusivity over certain geographic areas to bring cable to new consumers. These local monopolies were permitted because it was (and is) very expensive to build the infrastructure that would bring TV and later internet to homes and businesses.

Consumers are left with a perfect storm for internet manipulation.

The government made a deal: Companies spend the money to build out these networks, and then get years and years of gently regulated but competitor-free business.

It worked. Starting in the 1970s and accelerating into the 1980s, billions of dollars were poured into creating cable systems. That continued through the 1990s and early 2000s as companies built out their broadband internet networks.

That money is an investment by companies who believed they would be free to operate those networks as they saw fit. After all, they took the risk of building them, so they should be able to reap the rewards. Maybe that's not entirely fair to consumers or internet companies, but that was the deal.

That deal changed....

Those companies are now understandably upset because a couple years ago the U.S. government's primary media regulator put in place strict rules about how companies could handle the networks they spent money to build. It was, in their eyes, an unfair change to the bargain that had been struck. In response, they threatened to stop investing. If they couldn't be sure of future profits, then they would stop building out their networks.

Seems like a reasonable business move, though not one that these companies seem to have lived up to. There's no real signs of slowing investment—because being an internet provider is still really profitable. Time Warner Cable, for example, has generated an insane 97 percent profit margin for its internet service—meaning they charge far more from customers than it costs to operate their service.

Too much profit? Too bad. That's the tradeoff. Conservative industry advocates point to just how long it takes for cable companies to recoup their investments from building networks. Other companies like Google have learned just how costly it can be to build out a network. Internet providers have to squeeze every last penny out of those networks. Starting to play favorites and charging internet companies for access to consumers is a great way to do that.

There's no way you have this many options for internet-streamed live TV without net neutrality.

Consumers are left with a system in which their internet providers have no competition and are eager to recoup their investments—a perfect storm for internet manipulation. These companies have been built on the notion that they will be able to own this network and milk profits from it. Asking them nicely not to is unfair to everyone involved.

That's why open internet advocates pushed for the strong net neutrality rules put in place under the Barack Obama administration. It's also why those same advocates are predicting doom if the FCC of the Donald Trump administration succeeds in undoing that work.

Could those fears be overblown? Yes, if you believe the internet providers and their advocates. They argue the internet grew and flourished as an open and free place without the need for net neutrality regulation. The current rules are "a solution that won't work to a problem that doesn't exist," according to current FCC Chairman Ajit Pai, who is leading the charge to undo those rules and remove the regulator entirely from overseeing internet companies.

It's a fair question to ask—why, if these companies are so predestined to manipulating the internet—haven't they?

The answer is twofold: They have, and there's far more incentive now to start using a heavy hand.

On the second, the internet isn't just a bunch of ugly websites anymore. Many of the most valuable and powerful companies are based on the internet; people are spending more time on the internet consuming high-end content like music, TV, and movies.

This has led to an explosion of innovation not just from companies like Netflix that are changing what it means to be a content company, but also from companies that are packaging content in a different way. There's no way you have this many options for internet-streamed live TV without net neutrality.

"The financial incentives to bend the rules are too great. Without Net Neutrality, there wouldn't be overt blocking, but a million and one tricks and tactics that have the end result of making both consumers and app companies pay more," said Tim Wu, a professor law at the University of Columbia and the person who coined the term "net neutrality."

We know this because we have literally seen it before. TV used to be entirely controlled by these companies. The result was few options for consumers and massive profits for the cable companies. They controlled everything that came down their pipe, and companies had to pay a hefty fee to get through there.

Now imagine the exact same thing was done to the entire internet. That's what has open internet advocates up at night.

But don't expect some sudden shift. No company is going to block Netflix or start charging Facebook big bucks to reach people. Instead, it will be a slow and insidious creep—which we're already seeing in mobile internet access.

"You might also see 'Microsoft-style' neutrality (circa 1990s), where an ostensibly open platform always somehow worked best for Microsoft's products. That's how we got stuck with office for an entire generation," Wu added.

Is there any hope? Lawrence Lessig, a law professor at Harvard University and noted net neutrality advocate, when asked over email whether people should have any faith in internet providers to keep net neutrality, passed along this link: The story of the Girl and the Snake.

It's an old fable about remembering the true nature of things even as they try to convince you otherwise. In this story, a girl is convinced by a snake to rescue it with a promise that it won't bite.

"You knew what I was when you picked me up," the snake says after having bitten the girl.

We know what internet providers are. We should know better. And we're about to get bitten.

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